Congressmen Push House to Pass Bipartisan Bill exempting Arizona Families Tax Rebate from Federal Income Tax

PHOENIX—As Arizonans make their Thanksgiving shopping lists, more than 700,000 households in the state do so a hundred dollars or more short because of an unfair and arbitrary decision by the Internal Revenue Service to subject the one-time Arizona Families Tax Rebate to federal income tax.

Congressman David Schweikert, joined by Reps. Greg Stanton and Juan Ciscomani, sent a letter to House leadership asking them to bring H.R. 8016, bipartisan legislation excluding the one-time Arizona Families Tax Rebate Program from federal income tax to the floor for a vote this year.

“Ahead of the holiday season, Congress has the power to right this wrong and grant Arizona families financial relief,” the Congressmen wrote.

The full letter is available HERE.

Background

In February of 2023, tax rebates enacted by 21 states to help families deal with rising costs after the pandemic were determined to be tax exempt in guidance issued by the IRS. Three months later, Arizona state officials used took this guidance in good faith to institute the one-time Arizona Families Tax Rebate for eligible households with dependent children and awarded $250 per child, capped at $750.

However, the IRS determined Arizona’s rebate uniquely did not meet its exclusion requirements, and thus the Arizona Families Tax Rebate Program would be subject to federal income taxation. In March of this year, the three Congressmen sent a letter to IRS Commissioner Daniel Werfel urging the agency to reconsider its decision.

The Arizona Attorney General sued the IRS at the beginning of this year, but the case was dismissed earlier this month by a U.S. District Court Judge.

According to the Arizona Republic, for filers in the 22% tax bracket, the tax on $750 worked out to about $165.